Link savings to checking for higher yield

Relationships matter, particularly if you're looking for high yields on your savings and checking accounts.

A handful of banks and credit unions around the country allow you to link your high-yield checking account with an interest-bearing savings account. At one credit union, you can earn 0.25 percent annual percentage yield on savings accounts with a minimum balance of $100 while a connected rewards checking account pays 3 percent APY on balances to $15,000, according to DepositAccounts.com.

"The interest rates are very compelling, compared to what you would get on the open market," says George Hofheimer, chief knowledge officer at the Filene Research Institute, a think tank backed by the credit union industry.

Banks build customer loyalty with linked accounts

By offering these high-yield or rewards checking and savings accounts, financial institutions are aiming to build customer loyalty. "There's a much greater chance they'll take out a loan and remain customers of the bank for a longer time," says Dan Clancy, executive vice president of services for the Independent Community Bankers of America.

Atlantic Regional Federal Credit Union in Brunswick, Maine, launched its high-yield accounts more than two years ago. "We wanted to find a way to give back to our members" at a time of continued low interest rates and a still-challenging economy, says Roger Sirois, the credit union's CEO.

To earn the higher rates, you're typically required to jump through certain hoops, such as using your checking account debit card to make 10 to 15 purchases per month, making a direct deposit, making an online payment each month, using online banking and/or receiving your monthly statements electronically.

Rack up a tidy return with rewards rates

As a reward for meeting those checking account requirements, you receive a premium rate on both checking and savings accounts.

While the rates may not make a big difference if you have only a couple hundred bucks in checking or savings, they add up if you've got larger sums to set aside, Filene's Hofheimer says.

"People have a hard time saving," Hofheimer says. "Any mechanism that can encourage saving, however small, will have a positive reaction."

In most cases, the checking and savings accounts offer the best rates on relatively low balances, such as $10,000 or $15,000, so a rewards savings account isn't the place to park large amounts of cash. And if you don't meet the requirements for a certain month, you'll receive a minimal rate, such as 0.05 percent APY, on savings, as well as checking accounts.

For example, at Atlantic Regional, members earn 1 percent APY on their rewards savings for balances less than $20,000 and 2.5 percent APY on balances to $10,000 in their rewards checking accounts. If qualifications are not met on the checking account, all balances in the savings account and checking account earn 0.05 percent APY for that month.

Rates aren't as good at megabanks

It's a sharp contrast to what the big banks are paying. Bank of America requires you to check rates by state. In such big states as Florida, New York and Massachusetts, Bank of America pays a lowly 0.01 percent APY on its savings account. It can be linked to checking, and you can avoid a $5 monthly fee on savings if you make combined monthly automatic transfers of $25 or more from your checking account.

Chase requires you to check the rates offered on accounts by ZIP code. The banking giant has a linked checking and savings account, and if you live in Chicago or Miami, the "relationship rate" is 0.05 percent APY on savings accounts with balances less than $50,000. It can be linked to a checking account with an APY of 0.01 percent.

With a top-paying online bank, you can earn about 1 percent APY on regular savings and money market accounts as well as certificates of deposit, but they aren't linked to a regular or high-yield checking account.

Rate champs: Community banks and credit unions

Many of the best-paying rewards savings and checking accounts are available at credit unions and community banks, under the Kasasa name. Kasasa was created in 2009 as a way for local financial institutions to build a communal brand to compete against the big banks, says Gabe Krajicek, the chief executive behind the brand.

He says many banks historically have used products such as certificates of deposit to bring in new clients. They pay high rates and have limited relationships with customers. The thinking with products such as CDs has been: "Give us your money and leave us alone for a year," Krajicek says.

For financial institutions that offer rewards savings and checking accounts, the hope is customers will think, "I'm going to put all my eggs in that basket," he says.

Technology helps to boost rates

These community financial institutions are able to offer higher savings and checking rates, thanks to technology. For example, if you receive electronic monthly statements, the bank saves the cost of preparing and mailing statements. And if you use a debit card, the bank receives interchange fees when a consumer swipes his or her card in a retail transaction.

So, if you're already using your debit card, opening a high-yield savings and checking account "tends to be well worth it," Hofheimer says.

Kasasa accounts, as well as some typical rewards savings and checking accounts that aren't part of the Kasasa network, have no monthly account maintenance fees and no minimum balance requirements to earn interest, Krajicek says.

Atlantic Regional, which is part of the Kasasa network, had about 6,700 rewards checking and savings accounts, with a value of about $21 million as of May 1, says Chief Financial Officer Fred Johnson.

Younger people have joined the credit union because they're already comfortable using technology for transactions such as online bill payment, and are attracted by the high interest rates, Johnson says. Older members "struggle from the technology side, but add more money to their wallet on a monthly basis."

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